Energy Efficiency in Residential Sector of Albania & Kosovo

Tirana, Albania July 7-8, 2014

IFC Advisory Services in Europe and Central Asia

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IFC in Albania • Operates in Albania since 1991

• IFC's investment in Albania totaled $621 million, including $180 million in syndicated loans since 1991

• Committed investment portfolio in 2013 is $213 million in the financial sectors, industry, oil and construction.

• In 2013 additional $146 M were mobilized from partners.

• IFC’s advisory services in Albania aim to improve the investment climate, performance of private sector, access to finance, and to attract private sector participation in development of infrastructure projects.

• Energy Finance AS program present since 2009

•Oil and gas

•Cement industry

Infrastructure

Focus Areas

Albania potential for energy efficiency (EE) in residential sector

Basic info about the sector

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• The housing sector in Albania consume 49% of all electricity available.

• 14 million m2 - The residential floor area of the building stock

• The price of electricity is increased by 66% in 2003-2010

• The energy market will be liberalized in 2015

• National Energy Efficiency Action Plan (NEEAP) goal of 9 % energy savings by 2018

Residential EE potential

• € 600 million– estimate Investments for

Energy Efficiency of Residential sector

• 30%-50%– energy saving potential of Residential sector

• 3-7 years – average payback period for Residential EE investments

• 88% of the buildings are constructed before 1990 and require EE renovation

Challenges of EE in Albania

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GWhOthersAgricultureServiceIndustryHousehold

Challenges

•Regulatory framework

•Lack of gov. incentives to EE investments

•Lack of sectorial capacities (agencies, Auditors)

•Sector not aware of the market potential

•Banking sector lack of capacity and funds to be allocated for new products

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IFC in Kosovo • Operates in Kosovo since 2009

• Total committed investment portfolio over $20 million in the financial sectors and manufacturing.

• In 2013 additional $369M were mobilized from partners.

• Other active advisory work includes Investment Climate including Trade Logistics, Renewable Energy, PPP Infra, Corporate Governance and Financial Literacy.

• Sustainable Energy Finance AS program present since 2014

•Mining •Cement industry

General Manufacturing

Focus Areas

Kosovo potential for energy efficiency (EE) in residential sector

Basic info about the sector

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• 48%- The building sector energy consumption as share to total consumption

• 45% / 44% – Energy sources for Residential sector- Biomass / Electricity

• 37 million m2 - The residential floor area of the building stock

• 79% - Household buildings over 20 years old

• National Energy Efficiency Action Plan (NEEAP) was adopted with the goal of 9 % energy savings by 2018

Residential EE potential

• € 1.12 bn – estimate Investments for Energy

Efficiency of Residential sector

• 46.1% – energy saving potential of Residential sector

• 5.85 years – average payback period for Residential EE investments

• One-story houses – focus subcategory for banks with the biggest amount of Investments needed (460 Million Euro)

• Progress has been made in terms of the legal and regulatory basis for EE improvements in Kosovo

Solutions for energy efficiency (EE) in Kosovo residential sector

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20%

50%

30%

Share of measures in Residential EE potential

Heating system Thermal Insulation Double / triple windowsYearly investment required for each EE measure for each energy service in the Residential Sector (€ million)

Limitation factors faced by implementers of EE projects

• Energy scarcity and increasing energy prices

• Unawareness of available technologies and benefits of application

• Lack of awareness of real economics of properly designed projects

• Gradual need for retrofits/upgrade of essential systems incl. buildings and SME/corporate premises

• New business opportunities for contractors/equipment vendors/ESCos

• Payback periods

• Financing

IFC Sustainable Energy Finance Programs

•Risk Positions at the Level of the Bank:

• Credit lines • Equity • Subordinated debt • Currency swap • Trade finance

•Risk Positions at the Level of the Underlying Assets:

• Guarantees

• Portfolio Risk Sharing

• Direct Co-financing

Investment (IS) Advisory (AS)

• Product Development • Trainings for staff

- loan officers, - credit risk managers, - marketing personnel

• SEF calculator • Marketing activities

• Project assessment support

• Pipeline Development • Seminars • Work with

contractors/vendors

•Project A

•Project C

•Project B

•Portfolio of EE /RE Projects

•Financial Products

•Local Financial Institution

•Bank Loans to EE/RE Projects

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General implementation components

Awareness raising and knowledge sharing

1. Round tables/workshops 2. Knowledge sharing 3. Brochures/booklet 4. Media appearances 5. REE fair

Sectorial Support

1. Training for Residential EE auditors 2. Regulatory work on Energy Efficiency by-laws

Concurrent

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• Higher resource efficiency

• Greater cash flow due to energy cost saving

• Reduced costs in parallel with higher

product/service quality and stronger competitiveness

• Better control over internal processes

• Reduced impact of processes on the environment

Taking advantage of IFC advisory support Principal Benefits

• Expanded business and more effective work

with existing client base

• Stronger market position thanks to competitive differentiation

• Increased credit portfolio

• Lower credit and technological risks

• Business model to be up-scaled ( from individual EE lending to MFB lending)

• Business perceived as socially responsible

For banks For companies

AS and IS banking projects related to SEF product

EMENA region

TCB Bank USD 18 million 2011

LOCKO-Bank USD 20 million 2010

Credit Bank of Moscow USD 20 million 2010

Center-Invest Bank USD 10 million 2010 USD 4 million 2008

NBD Bank USD 8 million 2008

MDM Bank USD 50 million 2008 USD 35 million 2007

URSA Bank USD 53 million 2008

Examples of IS – AS joint projects: IFC financing + consultations

Tamweelcom USD 3 million 2011

AmeriaBank USD 15 million 2010

MTBank USD 10 million 2011

Bank Respublika USD 15 million 2013

Credins bank USD 13.3 million 2012

Examples of advisory projects

Erste Bank 2010

Banque Libano-Francaise 2012

SME Bank 2011

Prime Finance Bank 2009

Agropromcredit Bank 2009

Tatfondbank 2007

Societe Generale Albania 2012

Union Bank Albania 2014

Fondi Besa mfi 2010

NOA mfi 2010

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Example of EE Advisory Credins Bank (Albania)

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2010-2012

Bank’s need:

• Increase micro loans business and implement modern banking products

IFC Solution:

• Residential Energy Efficiency Finance Program

• Specialized program with a focus on bank needs in this area: delivery of manuals and tools, training on financial & technical aspects of energy efficiency investments in residential sector

Outcome:

• About USD 5 million in retail EE loans to more than 1.000 customers since 2011

• Advisory Services led Investment transaction with Credins Bank for EUR 10 mln

Internal Awareness of the Bank

→ Adaptation of "Green Bank" image - Energy Efficiency is not just business but also Social

Responsibility

Creating internal support structures at the Bank

→ Dedicated group of internal experts

Financial incentives when the Bank launch the product

→ Favorable loan conditions

Know your client

→ Each individual client has specific energy needs

Specialized technical assistance

→ EE Lending is a new business, unlike classical Lending

→ Market research study to be obtained ahead- strategy and product development

→ Continuous training courses of staff

→ Marketing support and network equipment vendor of EE

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Key sucess factors to EE lending

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Thank you!

Contacts:

Bajame Sefa Operations Officer Financial Institutions Group IFC Europe and Central Asia Tel.: +355 682086976 E-mail: bsefa@ifc.org